Some of your comments are confusing and I think it is just that you wrote them too quickly without more detail.
1. "There is no such thing as vols spike in the front months and not in the back."
Hmm that is strange since we see repeated situations where the current month spikes up on a pending FDA announcement or major earnings release. That is why many do calendar spreads where the skew can be 20 - 40% between front and back months. So on its own there is evidence to the contrary.
Maybe what you meant is that it is unlikely the front month would spike from 40 - 70%, for example, and the back month would stay flat at 40? Because that is what I expect to happen and why I have gone out longer in time with my longs to max my vegas out as much as possible and also give me time for directional moves. With such high vegas I do not need the back months to spike. I actually test the positions with minor IV increases to see the profit affect as a factor in placing the trade.
2. "The reason SHLD's implieds went to 72 has nothing to do with vols increasing."
SHLD's jump in vols has nothing to do with vols increasing
3. "On Thursday, all else being equal the implieds will go over 90 while vols may actually decrease."
So the vols will go over 90 but the vols will actually decrease?????????? Ok clear as mud.
4. "Doing a long vega bet based on this "spike" is crraaazzzzyyyyy but carry on."
Let's try something different from the SPX thread were people actually add something for learning purposes. To just stand on the platform and say the position is crazy, especially given the ambiguity and contradictions in the previous posts adds not one thing at all and actually serves to confuse the subject. So maybe you left out something to make the point you were making. But to go long back months and short front months does not seem a crazy way to play vols at all, even Cottle would agree
I am sure there was a point in there, but unfortunately you did not make it. I want this thread to be constructive and not just have attacks on the strategy
(tone= light-hearted)
1. "There is no such thing as vols spike in the front months and not in the back."
Hmm that is strange since we see repeated situations where the current month spikes up on a pending FDA announcement or major earnings release. That is why many do calendar spreads where the skew can be 20 - 40% between front and back months. So on its own there is evidence to the contrary.
Maybe what you meant is that it is unlikely the front month would spike from 40 - 70%, for example, and the back month would stay flat at 40? Because that is what I expect to happen and why I have gone out longer in time with my longs to max my vegas out as much as possible and also give me time for directional moves. With such high vegas I do not need the back months to spike. I actually test the positions with minor IV increases to see the profit affect as a factor in placing the trade.
2. "The reason SHLD's implieds went to 72 has nothing to do with vols increasing."
SHLD's jump in vols has nothing to do with vols increasing
3. "On Thursday, all else being equal the implieds will go over 90 while vols may actually decrease."
So the vols will go over 90 but the vols will actually decrease?????????? Ok clear as mud.
4. "Doing a long vega bet based on this "spike" is crraaazzzzyyyyy but carry on."
Let's try something different from the SPX thread were people actually add something for learning purposes. To just stand on the platform and say the position is crazy, especially given the ambiguity and contradictions in the previous posts adds not one thing at all and actually serves to confuse the subject. So maybe you left out something to make the point you were making. But to go long back months and short front months does not seem a crazy way to play vols at all, even Cottle would agree
I am sure there was a point in there, but unfortunately you did not make it. I want this thread to be constructive and not just have attacks on the strategy
(tone= light-hearted)Quote from rallymode:
Ok. I've seen this mentioned a few times in this thread and it is actually silly. There is no such thing as vols spike in the front months and not in the back. The reason SHLD's implieds went to 72 has nothing to do with vols increasing. It is only because time passed and you now have only a few days to expiration. On Thursday, all else being equal the implieds will go over 90 while vols may actually decrease. Doing a long vega bet based on this "spike" is crraaazzzzyyyyy but carry on.
